With an Education Savings Account, $2,000 can be contributed each year until the student turns 18.
On the other hand, a 529 Plan allows an adult to either prepay, or contribute, to a student’s education expenses. There are two basic types of 529 Plans. Review this chart to compare them.
As you do, keep in mind that both Education Savings Accounts and State-sponsored College Savings Plans are different than regular savings accounts because the account holder is actually placing money into investments that they select. Instead of earning interest on their deposits, they make a profit if their investments go up in value.
There’s no quick answer as to which of these three programs may be right for you. It may depend on where you live and what school your child attends.
Review this chart to learn some basics. Then ask at your bank to help decide which program is best for you.
College Savings Programs
|Education Savings Account||529 Plans|
|State-sponsored college savings plan||Pre-paid tuition plan|
|Save $2,000 per year until age 18. Use the money for student’s qualified educational expenses at almost any accredited school until student turns 30. Expenses can include purchase of education-related computer technology and Internet access. Savings are placed in investments, such as stocks and bonds. Account holder generally does not pay income tax on money they earn||For postsecondary education. Large dollar amounts can be contributed. Features may vary from state to state. Offers in-state tax benefits on some plans. Savings are placed in investments, such as mutual funds, selected by the state. May involve fees and risk||Pay tomorrow’s tuition at today’s rates. May be offered by states or private colleges and universities|
Click the Next button to continue.